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A Historical Perspective An Interisle White Paper
Prepared by: Interisle Consulting Group, LLC 39 S Russell Street Boston, MA 02114 http://www.interisle.net Lyman Chapin +1 617 686 2527 email@example.com Chris Owens +1 617 413 3734 firstname.lastname@example.org
ISP Peering and Interconnection
About this Report
Studies of Internet Service Provider (ISP) interconnection arrangements have been performed from many different perspectives, including the technical architecture of exchange points, the business and economic models that underlie peering and transit agreements, and the interaction between market-driven interconnection arrangements and public policy (at both the national and international levels). These studies have been extensively reported and analyzed (see Sources and References). This report is intended to provide an historical context for, and concise summary of, the evolution of ISP interconnection—how it originated, how it developed, and how it is practiced today—without exhaustively reiterating information that is available from other sources. The goal of this report is to describe the way in which the self-organized and selfregulating structures that govern today’s global Internet—including the arrangements that enable ISPs to connect their networks to each other—have evolved naturally, over a period of roughly 35 years, according to principles that are deeply embedded in the Internet architecture. These structures are selforganized and self-regulating not because the Internet is an anachronistic “untamed and lawless wild west” environment, but because years of experience have shown that self-management is the most effective and efficient way to preserve and extend the uniquely valuable properties of the Internet. Following an introduction to ISP interconnection in section 1, section 2 of this report describes the way in which today’s model of ISP interconnection has evolved over the past 35 years in parallel with the evolution of the Internet architecture. Section 3 describes the economics and management structures that have emerged from that process to govern today’s Internet. Section 4 identifies new challenges that have emerged since the turn of the century to the traditional arguments for and against the regulation of ISP interconnection. Section 5 summarizes the conclusions of the report. Section 6 contains a list of sources and references.
Copyright © 2005 Interisle Consulting Group, LLC. All Rights Reserved
and is the co-author of Open Systems Networking—TCP/IP and OSI.interisle. representative to the networking panel of the NATO Science Committee. Mr. BBN operated the NSFnet regional network NEARnet. He was a principal architect of the Open Systems Interconnection (OSI) reference model and protocols. and international standards committees responsible for network and transport layer architecture. representative to the computer communications technical committee of the International Federation for Information Processing (IFIP TC6). which became one of the first commercial Internet Service Providers (BBN Planet) in 1993. and during almost three decades of international technical and diplomatic leadership has played a key role in the development of the network routing and interconnection architecture. the Special Interest Group on Data Communication of the Association for Computing Machinery (ACM SIGCOMM).S. Chapin has served as the chairman of the Internet Architecture Board (IAB). Mr. LLC. service. and policy framework that support today’s globally pervasive Internet. which (as Bolt. Beginning in 1989. Before co-founding Interisle Consulting Group.S. Copyright © 2005 Interisle Consulting Group.net . All Rights Reserved www. and U.ISP Peering and Interconnection Page 2 About the Author Lyman Chapin has actively contributed to the development and evolution of the technologies and self-governance structures of what is now the Internet since 1977. He is a Fellow of the Institute of Electrical and Electronics Engineers (IEEE). acquired two other regional networks (BARRnet and SURAnet). standards area director for the Internet Engineering Steering Group (IESG). Mr. and protocol standards. and the U. Chapin has also served as a Director of the Internet Corporation for Assigned Names and Numbers (ICANN). and was separately incorporated in 2000 as Genuity. Chapin was Chief Scientist at BBN Technologies. protocols.S. co-founder and trustee of the Internet Society (ISOC). Beranek and Newman) developed the hardware and software for the first ARPAnet nodes installed in 1969. U.
owned and operated by many different corporate. Internet interconnection is fundamentally different from interconnection in the traditional.interisle. behind the scenes lie many individual networks. the range of choices that are available to participants. Bill Norton coins the roughly equivalent term Internet Peering Ecosystem: “a community of loosely affiliated network operators that interact and interconnect their networks in various business relationships. around the block or around the world. global. the nature of Internet interconnection agreements. for reasons that are intrinsic to the architecture of the Internet and how it has evolved. The unregulated marketdriven model on which today’s global interconnection arrangements are based has developed over the past three decades in parallel with the development of the Internet itself. End users see the seamless. Copyright © 2005 Interisle Consulting Group. institutional. the economics of interconnection.ISP Peering and Interconnection Page 3 1 Introduction Internet Service Providers (ISPs) connect their networks to each other in order to exchange traffic between their customers and the customers of other ISPs. ubiquitous communication medium known as the Internet.” 2 An excellent summary of the case that these studies collectively make for the unnecessity of ISP interconnection regulation is contained in FCC Office of Plans and Policy (now Office of Strategic Planning and Policy Analysis) Working Paper 32.S. The Digital Handshake: Connecting Internet Backbones (see Sources and References). and the number and variety of 1 In The Evolution of the U. LLC. All Rights Reserved www. joined to each other by interconnection arrangements.net . Interconnection enables the Internet as a whole to be ubiquitously fullyconnected. Internet Peering Ecosystem (see Sources and References). despite the fact that no single network operator could possibly provide Internet access in every part of the world. ISP Interconnection1 allows traffic originating at a source connected to one ISP’s network to reach a destination connected to another ISP’s network. circuit-switched telephony world. and studies by a wide variety of public and private organizations2 have repeatedly concluded that it represents the most effective and efficient way to provide ubiquitous public Internet connectivity without being either anti-competitive or inequitable. Interconnection is the glue that holds the Internet together. As a result. and governmental entities.
before LANs and PCs. 2 The Origins of Interconnection As we observe it today. and printers) to resolutely self-contained mainframe computers. Today internetworking.ISP Peering and Interconnection Page 4 participants in the market are different from their counterparts in the telephony world. and governmental organizations. using the standard Internet Protocol3. who took 3 The standard Internet Protocol is the “IP” in the familiar acronym “TCP/IP. there is an important distinction between internetworking.” www. “computer communication” meant connecting I/O and storage peripherals (such as card readers. terminals. Thus. Department of Defense funded several projects to build homogeneous networks before Bob Taylor. is the common operating mode throughout the Internet. LLC.net Copyright © 2005 Interisle Consulting Group. ISP interconnection is not an intrinsic technical feature of the Internet. In the 1950s and 1960s. interconnection takes place at specific public and private exchange points. All Rights Reserved .S. noncommercial. at which two or more ISPs make technical and administrative arrangements to exchange traffic. which enables networks based on different telecommunication technologies and protocols to exchange data. Early efforts to connect computers to each other led to “networks” based on a variety of different proprietary communications technology and protocols.1 Networking Neither internetworking nor interconnection were features of the Internet’s most distant precursors. The Information Processing Techniques Office (IPTO) of the Advanced Research Projects Agency (ARPA) of the U. which enables the owners and operators of different networks to collaborate as business entities in the provision of seamless end-to-end Internet connectivity to all of their individual customers. 2. and interconnection.interisle. it is a management feature necessitated by the fact that the ownership and administration of the physical components of the Internet infrastructure are distributed among many different commercial.
Copyright © 2005 Interisle Consulting Group. which originated in at least three distinct places during 1961-1965: in Paul Baran’s work at the RAND corporation in Santa Monica. 4 In the early to mid-1960s. it was possible to exchange information between them by building a translator. 2. and the idea of contention for channels was widely familiar in the radio context. in Leonard Kleinrock’s work at UCLA in Los Angeles. (c) messages broken into equal-size packets. 2) The concept of best-effort service.ISP Peering and Interconnection Page 5 over as IPTO head in 1966. CA. Kuo.net .2 Internetworking It is remarkable to realize that the very earliest thinking4 about what a “network of networks”—an “internet”—should be embraced the three key concepts that underlie the architecture of today’s global Internet: 1) The concept of packet switching. (b) no central control. which originated in the multi-access channels of ALOHAnet at the University of Hawaii (by Abramson. but as the number of networks grew. the n-squared scaling inefficiency of pair-wise translation led to the idea of “internetworking”—creating a network of networks. UK. and Binder. All Rights Reserved www. through 1970)5. recruited Larry Roberts to design a “distributed communications network” which laid the foundation for the ARPAnet. All three concluded that the strongest communication system would be a distributed network of computers with (a) redundant links. and in Donald Davies’s work at the National Physical Laboratory in Teddington. and (e) automatic reconfiguration of routing tables after the loss of a link or node. it was Bob Metcalfe’s brilliant leap from ALOHA to Ethernet (at PARC in 1973) that brought the concept of stochastic (non-deterministic) channel access into the networking mainstream. When there were just a few of these homogeneous networks. CA. 5 ALOHAnet was a radio network.interisle. LLC. (d) variable routing of packets depending on the availability of links and nodes. culminating in the July 1968 ARPA request for proposals for the interconnection of four ARPA research sites into what would be called the ARPAnet.
and operating the network was established at the very first NWG meeting.S. PSS.ISP Peering and Interconnection Page 6 3) The concept of application independence—that the network should be adaptable to any purpose. later Cyclades (Louis Pouzin).25-based networks that became Telenet.” after the serial number of the BBN report that described it. Initially the Packet Radio Network (Bob Kahn) and Packet Satellite Network (Larry Roberts). and the X. At the outset. installing. The first papers describing “packet network interconnection” were published by Vint Cerf and Bob Kahn in 1973. and the IMPs communicated with each other over 56Kb/sec. Datapac. Copyright © 2005 Interisle Consulting Group. and has carried through to the governance structures that oversee the Internet today—particularly the Internet Engineering Task Force (IETF). LLC. rather than tailored specifically for a single application (as the public switched telephone network had been purpose-built for the single application of analog voice communication). were being developed at the same time7. the ARPAnet was not an “internet”—each of its four computer hosts was connected to an Interface Message Processor (IMP) by a proprietary serial link and protocol6. lines leased from the telephone company. All Rights Reserved www. 2. the ARPAnet began using IP in 1977. From the beginning the ARPAnet was managed by an informal and mostly selfselected group of engineers and managers who began meeting as the Network Working Group (NWG) in the summer of 1968. in 1969.S.3 Interconnection The clearly evident usefulness of the ARPAnet to the U. Other packet networks.net . Defense Department contractors who were permitted to use it led other U. Government agencies to 6 7 Dubbed “1822. whether foreseen or unforeseen. using an ARPAnet-specific “host-to-host protocol” that was referred to as the Network Control Program (NCP). and Transpac. The tradition of self-management by the people designing.interisle. based on other protocols.
which linked academic mainframe computers. DoE.g. 8 The U. based on the Unix UUCP communication protocols. DoE's High Energy Physicists responded by building HEPNet. ARPA.S. and initially they did not. David Farber.net Copyright © 2005 Interisle Consulting Group. and NSF: the Federal Internet Exchanges at the University of Maryland (FIX-East) and NASA’s Ames Research Center in Mountain View. All Rights Reserved . 9 Led by Rick Adrion. disgruntled computer scientists9 who could not connect to one of the government-controlled networks established CSNET for the (academic and industrial) computer science community. AT&T’s wide dissemination of the Unix operating system encouraged the creation of USENET. CA (FIX-West). Eventually.3. the Federal Networking Council (for administrative matters) and the Federal Engineering Planning Group (for technical matters). The interconnection regime was designed primarily to isolate the regions within the emerging technologically uniform IP “internet” that were subject to different acceptable use policies. The prevalence of highly restrictive AUPs provided little incentive for the networks to interconnect. Department of Energy (DoE) built MFENet for its researchers in Magnetic Fusion Energy. and in 1981 Ira Fuchs and Greydon Freeman developed BITNET. NASA Space Physicists followed with SPAN. these early networks were restricted to closed communities defined by an “acceptable use policy” (AUP) that specified the uses to which the networks could legitimately be put (e. and Larry Landweber. With the exception of BITNET and USENET. LLC.interisle. to conduct research funded by a particular government agency). These interconnection points were managed by two informal groups of engineers and managers.1 Federal Internet Exchanges The practical awkwardness of operating multiple non-communicating networks eventually led to the establishment of two exchange points for federally-funded networks operated by NASA.. www. 2.ISP Peering and Interconnection Page 7 develop similar networks8.
net . and a host of other issues. which was created in 198110 under a grant from the National Science Foundation .” or interconnection without explicit accounting or settlement. and the X. In modern terms. BITNET.interisle. and established nameserver databases to enable any computing researcher to locate any other. financial. the bureaucratic complexity of which daunted even the most fervent advocates of interconnection—until the CSNet managers came up with the idea that we now call “peering. and those who could not (connecting instead to CSNet). This agreement was the turning point at which the evolution of commercial network interconnection began. as long as no commercial traffic flowed through ARPAnet.25 networks could not be connected to the ARPAnet (or to the other federal networks that were interconnected at the FIXes) because of the government policy limiting ARPAnet to government agencies and their contractors. It provided TCP/IP interfaces with USENET. 10 by Larry Landweber (University of Wisconsin). LLC.2 CSNet and NSFnet The USENET. Anthony Hearn (Rand Corporation). A landmark agreement between NSF and ARPA allowed NSF grantees and affiliated industry research labs access to ARPAnet. The purpose of CSNET was to link all of the computer science departments and industry labs engaged in computing research. Copyright © 2005 Interisle Consulting Group.3.ISP Peering and Interconnection Page 8 2. All Rights Reserved www. because no mechanism existed to reconcile the different Acceptable Use Policies of the two networks.25 networks. BITNET. The development of CSNet highlighted the disconnect between the “haves” and the “have nots” in the computing research community—between those who could find a government agency or contractor to sponsor their connection to the ARPAnet. contractual. David Farber (University of Delaware). and commercial X. we would say that the customers of one ISP (ARPAnet) could not communicate with the customers of another ISP (CSNet). This disconnect persisted as both sides assumed that any agreement to exchange traffic would necessarily involve the settlement of administrative. and Peter Denning (Purdue University). The turning point that eventually brought them all together was the CSNET project.
many network providers began creating their own private NAPs. NSF handed over its management to commercial Internet Service Providers (ISPs). Under the terms established by the NFS. a NAP operator was required to provide and operate an interconnection facility on a nondiscriminatory basis. Ameritech. as the National Science Foundation began the transition to private ownership and management of the NSFnet infrastructure.3. Pacific Bell. it established four geographically distributed. a high-speed backbone connecting its supercomputing research centers. and in 1996.net Copyright © 2005 Interisle Consulting Group. which extended the commercial Internet exchange model yet further. and MFS.where any interested party could co-locate equipment and connect its network to the NFSnet backbone or to other networks. the potential complexity of hundreds or thousands of ad-hoc bilateral arrangements pointed to the need for 11 By Peter Ford.>> As the original NAPs (also referred to as Metropolitan Area Exchanges. 2. using published pricing and established technical operating specifications. operated by Sprint. Bob Aiken. LLC. using routers.3 Network Access Points In 1993. NSF also commissioned the development11 of a deliberate architecture of backbones and regional networks that introduced the idea of hierarchy into the Internet topology. <<CIX in San Diego was the first to engineer the interconnection at the IP layer. or MAEs) became increasingly congested.3. Hans-Werner Braun. www. privately owned and operated Network Access Points (NAPs). and Steve Wolff. 2.ISP Peering and Interconnection Page 9 NSF went on to sponsor NSFnet.interisle. These NAPs were the first commercial Internet exchange points. the NSFnet had become the backbone of the modern Internet. All Rights Reserved .4 Commercial Internet Exchange Points As the number and diversity of NAPs increased. By 1990.
and operating philosophies.g. The Copyright © 2005 Interisle Consulting Group.net . serving the same or different markets. End users connected to ISPs by placing calls over the public telephone network to modem banks operated by the ISPs. and backbone providers were the wholesalers of the emerging commercial Internet. or via leased circuits of higher capacity. operating in every business from high-capacity backbone traffic down to dial-up lines. All Rights Reserved www. traffic metering. however. billing. 2. and clearing and settlement of charges between parties). to interconnect in ways appropriate to each. particularly for destinations that would be several “hops” away using a public exchange. led many ISPs to explore direct interconnection of their networks with those of other ISPs. in turn. NAPs. correspond to a strict hierarchy of ISPs and backbone providers as business entities. ISPs served end users by providing connectivity between them and the rest of the Internet. Others specialized in providing one form or another of connectivity to one or more specific markets. were the retailers. ISPs. a. neutral policy framework within which providers could implement mutually beneficial cost-sharing interconnection agreements. scopes. Some providers were vertically integrated. LLC. These exchanges provided a framework that allowed multiple providers of different sizes. but the opportunity to achieve better performance.3. traffic routing based on sophisticated criteria.5 Internet Service Providers If exchange points. It was at this juncture that there began to emerge a large number of privately operated NAPs.” which provided a uniform set of technical and administrative services (e.k. Internet Service Providers.2) began to develop as soon as commercial ISPs recognized that their interconnection arrangements could be a source of competitive advantage. or ISPs. The economic incentives and tradeoffs that are so richly diverse in today’s Internet (see section 3. This interconnection hierarchy did not. ”exchange points. Any ISP could connect to one of the public Internet exchange points.interisle. interconnection.a. connected to regional or backbone networks at NAPs or exchange points.ISP Peering and Interconnection Page 10 an overarching. operational support of routing equipment.
and more rapidly. Because North American Internet users were overwhelmingly the sources. the cost of connecting through an exchange point on the east coast of the U. in North America than in other parts of the world13. for example. of 12 The topology of Internet interconnection has emerged over the past decade as an important factor in studies of Internet resilience and survivability.interisle. with the Asian network operators paying the full cost of the trans-Pacific links. for example.12 2. for example. 13 With the notable exception of the UK. ensured that the Internet as a whole would always be fully interconnected. rather than the consumers. Copyright © 2005 Interisle Consulting Group. and from the much more favorable (largely unregulated) economics of Internet telecommunications in North America than in most other countries.S.3. which meant that even where a link existed between. This imbalance arose both from the early absence of an exchange infrastructure in other parts of the world. it was common for Internet users in Taiwan.net . Until relatively recently.ISP Peering and Interconnection Page 11 growing number of ISPs. The fear of Internet “balkanization” as a result of large ISPs refusing to interconnect with smaller ISPs is. in today’s Internet. Germany and France. to communicate with other Internet users in Japan or Singapore over a path that led through an exchange point in California (MAE-West). whether or not any particular pair of ISPs installed an explicit public or private interconnection. completely unfounded. All Rights Reserved www. the interconnection arrangements between North American ISPs and networks in other countries initially were biased strongly in favor of the North American ISPs. LLC. A corollary to many of these studies is the observation that the selfhealing properties of the Internet architecture guarantee that the Internet as a whole will remain fully interconnected even if most of the direct connections between individual ISPs were removed. the customers of every ISP could communicate with the customers of every other ISP. Edward J. and the variety of different ways in which the rapidly expanding Internet services market drove the development of creative combinations of public and private ISP interconnection. see. Malecki’s “The Economic Geography of the Internet’s Infrastructure” (Sources and References).6 Internet Exchange Points outside of North America Because the Internet developed earlier. could be an order of magnitude lower than the cost of a direct connection . which was connected to the ARPAnet much earlier than any other non-North American country.
3) detection of and response to denial of service attacks (and possibly other forms of distributed. they had very little incentive to defray the cost of connections to other countries. 2) the provision of services. that semantically span multiple ISPs. administrative. the pressure to regulate international ISP interconnection in favor of non-North American ISPs has substantially evaporated. all of which require cooperation and collaboration among multiple ISPs: 1) secure exchange of interdomain routing information. large and small. owned and operated by a literally uncountable array of providers: private and public. However. local and global. Interconnection is goverened by a wide variety of bilateral and multi-party arrangements. as dozens of viable regional Internet exchanges have emerged outside of North America14. financial. 14 A current list of Internet exchange points is maintained at https://www.interisle. Market forces now drive ISP interconnection decisions in many other countries as effectively as they do in North America. ISP interconnection. involves a number of issues that go beyond simply splicing together traffic streams. Copyright © 2005 Interisle Consulting Group. All Rights Reserved www. special-purpose and generalist.net .php. ISPs in non-North American countries were determined to correct this imbalance by forcing North American ISPs to subsidize the cost of inter-regional links. 3 Interconnection in Today’s Internet The fabric of today’s Internet is stitched together from a huge variety of links and individual networks.ISP Peering and Interconnection Page 12 Internet content. at the time of this report.com/private/exchange_list. from a technical. ranging from individual home users’ dial-up connections to globe-spanning networks of massive capacity. As recently as five years ago. operational. 60 of the 92 listed exchanges are located outside of North America. and legal perspective.peeringdb. LLC. multi-ISP attack that have yet to be seen). particularly “quality of service” (QoS) dependent services.
SNA). in the more familiar public switched telephone network (PSTN). and governance policies and practices that encourage high-quality engineering.25. time and again.g. regulated monopolies or governmentowned PTTs). ISP interconnection operates very differently in the Internet than its counterpart does. x. etc. other business models (e.. The differences are observable both in the basic architecture of interconnection—the decentralized and self-organizing “Internet approach” to packet switching vs. frame relay). end-to-end ownership of the transport infrastructure by a single provider). phishing. and other intrinsically multi-ISP exploits. The Internet approach is driven by self-organizing.1 The Internet Approach What can loosely be termed “the Internet approach” has become the dominant paradigm in networking. What has given vitality to the Internet approach isn’t simply that the current approach meets the needs of the current environment. architectural.). and • other forms of governance (e.ISP Peering and Interconnection Page 13 4) control of spam. All Rights Reserved www. it is that the current approach relies on underlying processes that are flexible. 3. LLC.1. self-regulating groups that have proved.. The Internet approach has displaced: • • • other technologies (e. emergency warning (cf.g. business. broad interoperability.interisle. for example. wiretap. adaptive. monolithic. other architectures (e.net . the centralized and heavily-managed PSTN circuit switching—and in the policies and economics that govern interconnection arrangements.g. and continued Copyright © 2005 Interisle Consulting Group.g.1 Interconnection Architecture 3. and compelling. their ability to create and maintain technical. point-to-point leased circuits. the recent IETF proposal). and 5) enforcement of national public policy mandates (universal service.
LLC. All Rights Reserved www.1 Technical Standards Internet technical standards are developed through the activities of the Internet Engineering Task Force (IETF). Almost every aspect of Internet technical development. coordinated by the Internet Architecture Board (IAB) and housed. administratively. The IETF is unusual in that it exists as a collection of happenings.1. and this fact has often been cited as the key to the Internet’s phenomenal success. In the 1990s. no members.1. The IETF is: “…a loosely self-organized group of people who contribute to the engineering and evolution of Internet technologies. self-regulating structure. members of the former NFSNET “Regional-techs” meeting formed an expanded group. while truly representing global consensus and thereby keeping participants on board.interisle.1. and no dues. 3. the operators of interconnected networks have met both informally and formally to share technical information and coordinate operating principles and practices. with a charter to promote and coordinate the interconnection of networks within North America 15 Tao of the IETF—A Novice's Guide to the Internet Engineering Task Force. within the Internet Society.net . and governance is managed by a self-organized. but is not a corporation and has no board of directors. and public policy. (see Sources and References).ISP Peering and Interconnection Page 14 creation of value. Selfregulation has allowed the Internet to adapt quickly and efficiently to the rapid pace of change and innovation in telecommunications technology.”15 The “loosely self-organized” IETF and related organizations have proven. over a 20 year history. 3. operation. Copyright © 2005 Interisle Consulting Group.1. called the “North American Network Operators Group” (NANOG).2 Operating Principles and Practices Since the earliest days of the Internet. to be effective at establishing workable standards and highly adaptive to the rapid growth and change that have occurred within the Internet. operations. It is the principal body engaged in the development of new Internet standard specifications.
or “lightbulbs. NANOG has been highly effective in allowing ISPs and backbone providers to coordinate their activities to efficiently provide seamless service to a broad market. Copyright © 2005 Interisle Consulting Group.com”. testifies to the success of the self-regulating NANOG model. trademarks and service marks). The fact that North American Internet users enjoy transparent access to the entire Internet. including: • • • • • • • AfNOG—the African Network Operators Group SwiNOG—the Swiss Network Operators Group JANOG—the JApan Network Operators Group FRnOG—the FRench Network Operators Group NZNOG—the New Zealand Network Operators Group SANOG—the South Asian Network Operators Group PACNOG—the Pacific Network Operators Group 3. Another measure of the effectiveness of NANOG is that other regions of the world have replicated the approach and have developed or are developing similar groups. All Rights Reserved www.1. Domain names combine aspects of traditional intellectual property (i. Domain names. such as “coca-cola.ISP Peering and Interconnection Page 15 and to other continents.com”. tangible infrastructure such as communications links and switching facilities. constitute one highly visible class of valuable virtual resource in the Internet.e. with the technical infrastructure required to cause the names to perform their intended function.3 Resource Allocation One of the most important governance functions in any domain is promoting an efficient exchange of value and allocation of resources.net . LLC. and virtual resources.1. there are two key types of resources in play: Physical. serving as an operational forum for the coordination and dissemination of technical information related to backbone and enterprise networking technologies and operational practices. In the Internet. regardless of the ISP to which they happen to be locally connected.interisle.
to achieving broad representation of global Internet communities.net . to promoting competition. marketdriven process • • The allocation of IP addresses The operation of the mechanism (also highly decentralized) whereby names are resolved to addresses. consensus-based processes.” 3. Under any addressing scheme. ICANN is dedicated to preserving the operational stability of the Internet. in which routers connected by communication links of various kinds compute routes through the Internet based on information they have received from hosts (end users) on any networks to which they are directly connected and from other routers. All Rights Reserved www. the Internet Corporation for Assigned Names and Numbers. there are only a fixed number of addresses available. through a highly decentralized. From its own description: “As a private-public partnership.1. the operators groups can establish a plan for deploying it. LLC. the IETF can establish an addressing scheme (and has done so). and to developing policy appropriate to its mission through bottom-up. an essential function for the proper operation of most Internet services. an Internet exchange point is a physical place (typically a room in a building) in which Internet routers Copyright © 2005 Interisle Consulting Group.ISP Peering and Interconnection Page 16 Another important virtual resource is the IP Address. unencumbered by policy or economics—ISP interconnection is no more complicated (or controversial) than simple internetworking.2 Interconnection Arrangements From a purely technical standpoint—that is. broadly participatory organization responsible for overseeing: • The allocation of domain names. but there still needs to be a mechanism for allocating the addresses. is an international. the numerical address by which each computer connected to the Internet is uniquely addressable. ICANN.interisle. In its simplest form.
When multiple carriers are involved. ISP A might learn. The most important difference between this model of Internet interconnection and the circuit-switching model of the PSTN is that the Internet dynamically selforganizes to find paths from one point to another without explicit preconfiguration or setup. and decide to use the exchange point to reach those users. and connect them to the exchange point routers.ISP Peering and Interconnection Page 17 are installed. without loss of data or manual re-configuration. All Rights Reserved www. rather than at a third-party exchange point. In today’s richly-interconnected Internet. there 16 In practice. The ISP routers and the exchange point routers exchange information about where different groups of Internet hosts—identified by their IP addresses—are located. or to a direct connection to another ISP.16 A similar arrangement obtains when two ISPs decide to connect their networks directly to each other. In the Internet. this process is much less dynamic (and much less robust) in the PSTN. LLC. for example.net . it can quickly re-route traffic through some other exchange point. if an ISP’s link to one exchange point (or the exchange point itself) fails. using routing protocols such as the Border Gateway Protocol (BGP). Copyright © 2005 Interisle Consulting Group. but this is not the classic “holdup” scenario that can arise from simple refusal to interconnect in the PSTN world.interisle. the possibility that an ISP could find itself unable to connect its customers to some part of the Internet because one or even many other ISPs refused to interconnect with it17 is vanishingly small. ISPs that want to use the exchange point to connect to other ISPs run one or more links from their own routers to the exchange point. and then over B’s network. 17 Some ISPs will refuse to carry traffic that originated with another ISP that has been “blacklisted” for sponsoring spam or phishing attacks. that a group of Internet users who are customers of ISP B can be reached through an exchange point to which both A and B are connected. Traffic from users on A’s network to users on B’s network would flow over A’s network as far as the exchange point. the way in which traffic flows are managed at exchange points is much more complicated than in this example. of course. where call re-routing depends on the prior negotiation and provisioning not only of alternative circuits but also of switch ports and switching fabric capacity.
Aside from the publicly available policies providing a useful look into the economics of peering. an interconnection agreement says “You carry some traffic for me. and (b) external mandates arising from laws. and other public policy instruments that apply to the jurisdiction in which the interconnection takes place. regulations.net . 18 Representative examples of large. and small networks’ peering policies are the MCI UUNet policy (at <http://global. or some combination of the two.1 Interconnection Agreements At its most basic. and the architecture of the Internet ensures that traffic will flow end-to-end regardless of where an ISP is connected. Copyright © 2005 Interisle Consulting Group. the Speakeasy policy (at <http://www. Interconnection economics refers to the way in which interconnecting ISPs assess and manipulate the economic variables that determine the viability of interconnection as a business proposition. medium. in return for which I’ll do something—either carry traffic for you. All Rights Reserved www. public and private. 3.2.ISP Peering and Interconnection Page 18 are simply too many available connection points.php>). 3.” Interconnection agreements are often tailored very carefully and minutely to the specific circumstances of the parties involved. While it was once the case that networks were quite private about their peering policies.interisle. or pay you. participatory market. LLC.speakeasy. the fact that they have become increasingly public speaks to an increasingly transparent. particularly when those parties are large ISPs.2 Interconnection Policy and Economics Interconnection policy refers to the way in which the technical and contractual arrangements that ISPs negotiate with each other to interconnect directly or at public or private peering points (Internet exchanges) are influenced by (a) the business objectives and policies of each of the parties.mci.com/uunet/peering/>). increasingly the market has become one in which networks publish their policies openly18.net/network/peeringpolicy. or (third example).
which adhere to one of four basic models: 1) Bilateral settlements. The provider charges a fee for carrying the other network’s traffic.interisle. and/or for the customers of other networks to which it is in turn connected (transit). a (usually commercial) facility carrying connections from multiple operators. possibly through a thirdparty exchange point or other intermediary. it is possible to consider them all as variations on a common theme (see Table 1) : • Networks “A” and “B” connect to each other. two operators each accept traffic from the other. Each accepts traffic destined for its own customers and originating within the other’s network. for delivery to the accepting network’s customers. Two operators interconnect. destined not only for its own customers but for third party networks with whom the provider in turn connects. Copyright © 2005 Interisle Consulting Group. national.ISP Peering and Interconnection Page 19 The current environment is one in which a heterogeneous mix of network providers—large and small. Each charges for the volume of traffic it accepts from the other. the net settlement amount would be zero) 2) Sender Keep All. • Each accepts traffic destined for its own customers (peering). the provider. local. But no charge is made. When all the different network interconnection arrangements are considered. LLC. public and private—connect to each others’ networks under a variety of arrangements. ( It follows that if the value of traffic in both directions is equal.net . accepts traffic originating within the other’s network. 4) Multilateral exchanges. 3) Transit. and global. There. Neither network delivers traffic to third parties on behalf of the other. traffic is routed to other operators’ networks via equipment provided by the exchange and according to rules administered by the exchange. All Rights Reserved www. An operator connects to an exchange. One operator. the operator settles through the exchange for traffic that others carry on its behalf and that it carries on behalf of others. As with bilateral settlements.
interisle.net . the pricing19 External. or it doesn’t. and in the case of a paid arrangement (bilateral settlement or transit). All Rights Reserved www. or preferentially choose interconnection partners where the peering relationship gives access to a desired technology.2. • The arrangement is either purely bilateral. • Technical factors: networks may require certain technical standards.2 Micro-economics of Interconnection Many economic and business-policy factors affect an individual ISP’s decision to peer or not to peer with another ISP.ISP Peering and Interconnection Page 20 • The arrangement either includes a cash payment made by one network to the other (again. such that a peering relationship would be symmetrical. Copyright © 2005 Interisle Consulting Group. possibly through a third party intermediary). or non-overlapping. “A” accepts traffic for: Its own customers only Other networks to whom it connects “B” accepts traffic for: Its own customers only Other networks to whom it connects Other Financial settlement None Cash Through an Exchange Multi-Party Networks connect: Directly Nature of Agreement Bilateral Table 1: Any given interconnection arrangement can be characterized by choosing one value from each of the columns above. such that a peering relationship would extend each network’s geographic reach. 19 Two recent studies of peering economics are reported in Economics of Peering and A Business Case for Peering in 2004 (see Sources and References). publicly-advertised factors include: • Geographic coverage of the two networks: either overlapping. or it is a multi-party agreement. LLC. 3.
ISP Peering and Interconnection Page 21 • • • • Operational: networks may require a certain level of operational support. it would lead to a higher perceived value and price than otherwise. In any given case. cost-effective transit. Anticipated traffic volumes. some obvious (direct cash payment. idiosyncratic factors apply. At a theoretical level. for example). in a perfectly fair market. that certain bilateral relationships between overseas and US-based networks are “unfair” on the grounds that the cost of the transatlantic or transpacific link was borne entirely by the overseas network. In some cases. Two arguments against intervention apply here: one addresses the argument itself and the other examines historical outcomes. where the value of the arrangement to each of the parties is determined by a number of factors. others entirely idiosyncratic . LLC. European ISPs in one country were connecting to US backbones in order to send traffic back to a neighboring European country.interisle. the arrangement is made on the basis of a perceived equitable exchange of value between the two interconnecting parties. should be borne by the two connected parties in proportion to the volume of traffic they Copyright © 2005 Interisle Consulting Group. Because so many idiosyncratic factors affect each interconnection decision. The argument has been made in the past. objective criteria in order to determine whether or not the market is distorted and the agreement gives either party undue advantage. Size: networks may choose to peer only with similarly sized networks. for example. All Rights Reserved www. where as the origination of traffic was split more evenly between the two. the implicit assumption that the cost of a link. Routing: networks may require specific routing policies and practices.net . if one network’s specific geography or customer mix or traffic mix dovetails with an important element of the other network’s strategy. bearing the cost in effect of two transatlantic hops. it is extremely difficult to analyze the economics of any particular interconnection arrangement using external. or access to a large user community. Additional. For example.
is flawed due to the additional factors other than traffic volume. it is worth examining the overall characteristics of the market in which these arrangements happen. the overall economic environment in which interconnection agreements are negotiated can be characterized as a free market with a large number of players. Does a buyer or a seller have a choice of many parties to deal with? Or is there a monopoly or oligopoly limiting choice? In some sense. and that anything else is perforce distored. does not mean that X’s customers will be unable to reach Y’s customers: X always has the option of buying transit from some third party who is in turn connected to Y. It was the rational. Models of interconnection economics have been developed by <<citations.2. connectionless architecture. Just because ISP “X” can’t strike a satisfactory bargain with ISP “Y”. that led to the emergence of this more effective network topology.ISP Peering and Interconnection Page 22 originate. financial desire to avoid paying transatlantic round-trips to connect to one’s neighbor. including “Internet interconnection and the off-netcost pricing principle”: “The purpose of this article is to develop a framework for modeling the competition among interconnected Internet “backbone operators” or “networks.3 Macro-Economics of Interconnection In addition to examining the factors influencing a single interconnection arrangement. that influence the value of interconnection to either party. discussed above. it has been observed that the European networks now connect to each other at multiple exchange points within Europe. (Y has a strong incentive not to make the terms of interconnection too onerous for at least some well-connected peers. connection-oriented public telephone networks. as contrasted with the circuit-switched. All Rights Reserved www. and not regulatory intervention.interisle. at risk of cutting its customers off from regions of the Internet) In addition to the intrinsic choice.“>> Copyright © 2005 Interisle Consulting Group.net . LLC. choice is intrinsic to the Internet’s routed. On a more pragmatic level. An essential characterization of a market is its liquidity. 3.
The presentation will be technical and geared toward an engineering audience. who would be able to form in effect a cartel and disadvantage their competitors. Copyright © 2005 Interisle Consulting Group. implies market distortion. Recently. It will draw upon specific examples and case studies of ISPs that have leveraged this trend. 20 Jay Adelson. Equinix. a slower pace of innovation. network performance and business expansion. as well as a review of specific products and their price points. On the other hand. uncompetitive. oligopolistic or monopolistic market. it is important to understand what might be the symptoms. it has been claimed that the barriers to entry in the backbone business have been lowered. Given the idiosyncratic nature of peering decisions. peering. resulting in the usual effects of reduced competition: higher prices overall. and damage to the end consumer. or signatures of a distorted. This presentation will review pricing trends and the opportunities that are being created for small and regional networks. fewer choices. Is it hurting the market? In assessing this question.net . There has. 2005 ISPCON conference. for example: “Trends in transport pricing over the past six months have created a disruptive change by lowering the barriers for small and regional networks to develop robust national backbones for application delivery. All Rights Reserved www. been considerable consolidation in the ISP market. Session announcement.interisle. founder and CTO.ISP Peering and Interconnection Page 23 It has been suggested that the free market operation of ISP interconnection would be threatened by consolidation and the emergence of a small number of dominant players. tracking the number of backbone operators and the entry barriers to the backbone business is likely to provide insight into the dynamics of the market. it is not clear that just because the cash economics of given a peering arrangement do not track the data transport volumes. geographic footprints.”20 It is worth following these predictions to determine their accuracy and applicability. LLC. or other obvious criteria. in fact.
In the PSTN. as it has to other challenges and changes over the past decades. This was the focus of NRIC V Focus Group 4. and the architecture of the PSTN is highly application-sensitive. Because the architecture of the Internet is application-insensitive.ISP Peering and Interconnection Page 24 4 New Challenges The Internet approach to interconnection faces several new challenges. does not observe the same functional layering as do IP networks. The first three challenges described below are well within the scope of the “Internet approach”: the existing policy mechanisms are well equipped to adapt to these changes. which has traditionally been the vehicle for global voice telecommunications. the final report of NRIC VI Focus Group 3 dealt with VoIP: “The recommendations and best practices included in this report address the interoperability of Voice over Internet Protocol (VoIP) and the Public Switched Telephone Network (PSTN). as they have to equally disruptive challenges and changes in the past. All Rights Reserved www. voice is just another application.net . are in many senses orthogonal to the operation of the Internet itself. voice is both the application and the driver for the architecture of every other part of the system. In the Internet. attention has been focused on interoperability at the application layer—VoIP in particular. More recently.1 Multi-Layer Interconnection Arrangements Today: interoperability and interconnection at the packet level (architecture—the Internet hourglass model). 4. which will force it to adapt. The fourth.” Copyright © 2005 Interisle Consulting Group. for example. interoperability between the Internet and the PSTN is freighted with serious difficulties. In 2000 the final report of NRIC V Focus Group 4 (see Sources and References). This comes about in part because the PSTN. In November 2003.interisle. relating to external attempts to bypass the selforganizing aspects of the Internet approach and impose poicy. and represent a significant and potentially distorting force. and at the IP layer a VoIP packet is indistinguishable from any other data packet. LLC. dealt with ISP interconnection at the level of packet exchange—how IP packets are conveyed across the boundary (physical and administrative) between different ISPs.
net .2 Balkanization Potential for balkanization of the Internet as backbone ISPs try to differentiate themselves (competitively) by offering services only to their own customers. operating with a high degree of transparency. operating practices and policies.interisle. inclusive organizations.4 Government Intervention Government attempts to control various aspects of the Internet (ITU. 4. resulting in a network infrastructure that does not provide a uniform. In every arena: technical standards. (see OPP WP 32 pg. and representing a broad constituency. 4. resource allocation. or controlling trans-border data flows). Possible emergence of a traffic-sensitive settlement system as ISPs in different situations try to deal economically with the asymmetry inherent in WWW. addressing the “Digital Divide” at a national or global level. universal standard of coverage. This will affect technical standards. the economic decisions surrounding a provider’s decision to interconnect. it may start to look like a tool for the achievement of public policy objectives (for example. 5 Conclusions Today's Internet is the way it is because of the way it developed. LLC. national governments). operating practices. All Rights Reserved www. 4. policy is established by self-organized. interconnection arrangements are likely to involve multiple layers of the Internet architecture. 26). Copyright © 2005 Interisle Consulting Group. the terms of interconnection agreements. and the overall market. and others. As the Internet becomes more of a core enabler of human activities. which concluded at the time that balkanization was not likely to occur because of other forces. This was anticipated by studies conducted in the late 1990s.ISP Peering and Interconnection Page 25 With the rise of VoIP and QoS-dependent applications.3 Traffic-Load Sensitive Peering Agreements Today: peering agreements are almost uniformly traffic-load insensitive.
FCC Office of Plans and Policy Working Paper No.gov/Bureaus/OPP/working_papers/oppwp33. 33.pdf A Competitively Neutral Approach to Network Interconnection. and watch for the signatures of a distorted market. FCC Office of Plans and Policy Working Paper No. should refrain from action. Jason Oxman. and run the risk of being destabilizing and harmful.gov/Bureaus/OPP/working_papers/oppwp31. Jay M.net .gov/Bureaus/OPP/working_papers/oppwp34. or in furtherance of orthogonal policy objectives (solving the “digital divide” problem. and the policy makers would lose their mandate. On the other hand. Barnekov. December 2000. http://www. which creates a strong bias toward policies that facilitate growth and efficiency. http://www.gov/Bureaus/OPP/working_papers/oppwp32.fcc.fcc. 32.pdf Copyright © 2005 Interisle Consulting Group.interisle. If the policy making organizations didn't respond to that imperative. Patrick DeGraba. to redress perceived inequalities in access or pricing. 31. the self-organized. given the inherently decentralized native architecture of the Internet and the heterogeneous. 34. no matter how well intentioned or carefully crafted. which is an important source of the Internet's vitality. for example). September 2000. The incentives are well aligned: due to the network effect.fcc.pdf Bill and Keep at the Central Office As the Efficient Interconnection Regime. FCC Office of Plans and Policy Working Paper No. are contrary to the fundamental. continued growth of the Internet is a rising tide that lifts all boats. but until such problems present themselves. FCC Office of Plans and Policy Working Paper No.fcc. July 1999. global market in which the Internet operates. http://www. December 2000. the participants wouldn't follow. http://www. Atkinson and Christopher C. Regulatory policy-makers should remain attuned to the possibility that future developments would lead to a less competitive environment.pdf The Digital Handshake: Connecting Internet Backbones. either in the service of "improving" the Internet itself. LLC.ISP Peering and Interconnection Page 26 This approach is nearly inevitable. All Rights Reserved www. 6 Sources and References The FCC and the Unregulation of the Internet. top-down attempts to regulate. decentralized nature of the Internet. At present. self-regulating aspects of the Internet are thriving. Michael Kende.
pdf> The ISP Survival Guide: Strategies for Running a Competitive ISP. All Rights Reserved www.xchangepoint.net/resources/papers/asia-pac-ix-update/asia-pac-ixupdate-v11.org/pubs/nric5/2B4appendixb. Paul Milgrom. Scott Marcus. Appendix B: Service Provider Interconnection for Internet Protocol Best Effort Service.html> The Evolution of the U.S.pdf> Copyright © 2005 Interisle Consulting Group.org/pubs/nric5/2B3finalreport. Ingo Vogelsang and Benjamin Compaine (eds). Reprinted from The Internet Upheaval.student. NRIC V Focus Group 4 Final Report. May 2002. October 1999. William B. Presentation to NZNOG 2005 conference.pdf> Economics of Peering. Wiley Computer Publishing. <https://ecc. November 2003. 1998. 2. Summer 2003 pp. April 2005.stanford.net .edu/~milgrom/publishedarticles/TPRC 1999.nric. 34. Bridger Mitchell. 2000. <http://www. 1998.equinix.com/pdf/whitepapers/PeeringEcosystem. September 2004. Peering and Financial Settlements in the Internet.com/peering/downloads/A Business Case for Peering in 2004. Internet interconnection and the off-net-cost pricing principle. Marshall Friemer.ISP Peering and Interconnection Page 27 Evolution of Internet Infrastructure in the Twenty-First Century: The Role of Private Interconnection Agreements. No. William B. William B.org/inet99/proceedings/1e/1e_1.net/info/wp20020625.pch. <http://www. 14 September 2004. FCC Network Reliability and Interoperability Council.isoc. 3 February 2005. and Padmanabhan Srinagesh.net/documents/papers/Gibbard-peering-economics. LLC. <http://www.ppt> Competitive Effects of Internet Peering Policies. <http://www. Norton. Geoff Huston. <http://vjolt.pdf> The Art of Peering—The Peering Playbook. Internet Peering Ecosystem.pch. Cambridge: MIT Press (2000): 175-195.edu/graphics/vol3/vol3_art8. Norton. Geoff Huston.” New York City.nric.pdf> Economic Trends in Internet Exchanges. Interconnection. and Jean Tirole. Steve Gibbard. February 2005. June 1999. November 2003.htm > Without Public Peer: The Potential Regulatory and Universal Service Consequences of Internet Balkanization. <http://www. September 2000. Bill Woodcock. RAND Journal of Economics Vol. Patrick Rey. Virginia Journal of Law and Technology. FCC Network Reliability and Interoperability Council. <http://www.virginia. Rajiv Dewan. University of Rochester.equinix. <http://www.internet peering. Fall 1998. Rob Frieden. < http://www.pdf> A Business Case for Peering in 2004. and Pavan Gundepudi.interisle.doc> NRIC VI Focus Group 3 Final Report. Presentation at the 1999 Internet Society Conference (INET 99). Norton. 370–390. Jean-Jacques Laffont. Presentation to “Gigabit Peering Forum IX.
html> Copyright © 2005 Interisle Consulting Group.org/tao> The Economic Geography of the Internet’s Infrastructure. Timothy Denton.pdf> Tao of the IETF—A Novice's Guide to the Internet Engineering Task Force. <http://edu. May 1999.ISP Peering and Interconnection Page 28 Internet Economics.interisle. Netheads vs.edu/econgeography/2002_04. Bailey (eds.ietf.net . Bellheads: Research into Emerging Policy Issues in the Development and Deployment of Internet Protocols. Susan Harris and Paul Hoffman.). McKnight and Joseph P. <http://www. MIT Press.tmdenton. Edward J. LLC.com/pub/bellheads. October 2002. 1997. All Rights Reserved www. October 2004. Malecki.clarku. Lee W. < http://www.